PE is not so China centric anymore.

Is it superficial to even think about segmentation geographies?

- Developed Asia – Korea, Japan

- Middle market – China, India
- Emerging – SEA
- Very different country development

Yes, one asia, 57% of global GDP over next decade will be from Asia. 60% of that is coming from
Asian consumers. China, india, Japan will contribute for 2/3 of that.

But not one asia because each country is so different in terms of size.

Need bespoke, diversified portfolio with flexible capital.

Lower GDP in India, go for early stage

More developed country like China, go for the full scope.

Australia – 8 hours flight from Singapore, culturally so different.

20 years ago everything in asia is developing markets. There are some insights that you can get from
speaking to consultants or investment bankers, but nothing beats it then having invested in it
through the ages. So you know how to source, how to DD, how to manage portfolios and even who
to sell to.

Is multi sector, multi geography better than target?

- Performance is quite varied

- But will do performance analysis on the asset level before going up to the GP
- Regional managers have the ability to pivot, can hedge their bets. But regional managers will
always known for a particular sector or country. So can help to subsidise performance.
Double edge swords
- Country managers are good in that they will have outperformance. But country managers
difference is that they don’t have as much reputation that they have to protect and they can
hold LPs hostage
- Style drift – sometimes will make side pockets for performance short term. LPs might not be
as pleased with it – its not what they signed up for.

China performance not as strong. How much is it an area of opportunity or is it a concern? What are
the ripple effects on geographies where they are more concentrated on?

- Different risk factors for china now

- Politically sensitive sectors, prefers to have investments where there is global connectivity
potential
- L cat still investing into China despite the concerns
- Concerns are domestic policies like regulation, geopolitics, Chinese economy.
- First phase: export led economy cycle
 - Second phase: real estate led economy cycle. Private and public real estate
- Third phase: consumer led economy growth. 2003: consumer GDP is 20%. 2015: 35%. 2023:
58%. Clearest trend of where defensive and offensive strategy is.
- Used to be dependent on exports and FDI. Domestic consumption needs to drive China
growth. People are saving more, but this is temporary, not structural. All these money will
flow back into the economy.
- Valuations – near market for publics
- Geopolitics – SF
- Competition – very little competition for deals now

- China is very interesting now because of valuations

- Institutionally are very cautious because they are international PE. Bar is very high. Not out
out, but cautious
- Non Chinese focused are benefiting because of Chinese inflow into various countries. Will
affect more of the top tier markets not really middle markets. Middle markets international
guys don’t understand, so they wont pull trigger.

- Those people who have made their name on Chinese names will have trouble fund raising
- Deal flow is still the same. Bar is still high. EU IC wont understand the nuance.
- Secondaries – two way of looking at it. 1) just an Asian asset. These deals are not going to be
a hot market because ICs sits in NY. So unless the PM sits in Asian. 2) if the seller is Asian.
Asian LPs are more interested in investing into Asian PE.

China is near bottom. Other markets are characterised by euphoria. Which markets are undervalued
or overvalued?

- India is the hottest and most attractive. But pricing is still high. Got to be sensible.
- Japan is quite good, quite balance. Valuations are reasonable. Risk reward quality of
business is not bad.
- SEA. Valuation is not cheap. Quite high. Not as high as India. But fundamentals strong. Right
mix between valuation being manager but growth is potential.
- Greater China maybe not China is interesting because have potential but without the
garbage

Point of purchase – valuation is important

Portfolio management and value creation

What is the value creation blueprint? How does it differ between different regions?

- Begin with a strategic overview. Which regions, macros. What does it take for the company
to be successful? And plan out for the business.
- People (right incentives, leadership, down to structure), plan (5Y strategic plan break it down
into 1 year plan), capital (make the allocation decision)
- How to drive growth in a slower moving economy
 - Look to buy good business. Easier to grow good businesses than fix bad businesses
- But making sure that you have the right people in place
- When you know you have got it wrong, you move quickly
- Being catalyst, cajoling, encouraging, making sure that management is right

How is valuation creation being affected by macros

- Not much change for overall approach

- Just a continuation of the trends. Increased focus that companies are resilient and robust.
Ability to deal with low probability event
- Nothing overwhelmingly new
- AI for creating value creation

Exit

- They have pulse on distribution, if it slows down they can feel it

- Not good for LPs who are looking for distributions
- But secondaries have grown exponentially
- In the past it’s a 10 year plus period – it’s a contract, cant exit
- Now its very different, 100-150b market every year
- PE has been a self funded asset class. Asked for $100m in 2012, 2015 ask for $200m, don’t
even have to think about it. Now cannot have that luxury. Need to rethink about the
commitment. It’s a liability that they need to fund now. From an LP perspective the net cash
flow has been negative for the past few years. The red line is growing. Great for secondary
buyers as providers of capital and liquidity.

If exits are slower, how does this affect deal flow. Smaller tix size, lesser to deploy

- Exit market is not correlated directly to cheque size

- Will be more prudent because of macros
- Sector focused investors can create an ecosystem for their portfolios
- Makes strategic exits easier
- Tough exit market no question. What do you have left in the toolbox?
- Deals have to become bigger as they grow bigger. Not possible to have 40 companies
- Need to focus on creating quality assets
- When the going gets tough, the tough goes shopping for deals

Exits through continuation funds

- LPs are concerned about using continuation funds in the right way
- Need great assets, great growth opportunities than have potential more than the lifespan of
the current fund
- But if its just purely liquidity mechanism for extracting carry for GP then needs to be very
careful
- Continuation funds really started to take flight during covid/2021
 - It will be a lasting aspect of PE
- Need those that are not looking for a quick buck
- Those that are real crown jewel. Don’t want to sell to a competitor. Want to hold forever.
Need to align interest of LP + GP but give selling LPs the ability to rollover. Cannot hold a gun
to LP and ask them to sell, they must have the ability to rollover.

ESG

- Don’t see it as a cost

- But there are enough opportunities to drive value. Businesses in supply chain, logistics,
transportation. There are good overlaps in being able to be more efficient, removing waste,
reducing carbon footprint, removing cost.
- Offering services to companies or corporates, they also have their ESG commitments so if
you help them with it you can help to get more revenue
- Organization that has a sense of purpose help with talent, recruit, retain. Esp after covid and
focus on mental health. Have a stronger more committed team
- Sustainability starts with financial due diligence, if you don’t add value you wont be here for
long.
- Need to be careful about ESG as a book sticking exercise. Regulators are careful about
greenwashing
- Need a cultural shift. Need to look at investments as a financial decision. ESG frameworks
helpful, but need a cultural shift.